In economics, there are theoretical approaches to the IM (with a significant increase in sophistication during the last two decades), empirical approaches inspired by such theory, simulations inspired by such theory, empirical approaches verifying the actual degree of market integration (such as 'home bias') and finally there is a great deal of applied economic work which may be inspired by analytical economic traditions but has to cope with the day-to-day practice of the development of specific proposals to deepen and widen it. An unconstrained definition of the IM has never really changed for economists, however: it implies the full liberalisation and proper regulation (combined with common policies where appropriate) of goods and services market as well as those of mobile factors of production. The EU has minor difficulties in goods markets still, but huge obstacles in services and still bigger ones in labour markets. For codified technology, progress has been impressive except
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The Meroni doctrine originates from a 1958 ruling of the ECJ. It pre-empts EU-level independent regulators from coming into being on constitutional grounds. However, the functional logic to have EU regulators for the IM of network industries is so powerful that EU networks of national regulators in combination with the Commissions’ role in competition policy (and the economic freedoms) become more and more important. In electricity, gas and telecoms, one observes the emergence of EU ‘regulatory networks’ as an ever closer substitute for a single EU regulator.
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Note that, in SEC (2007) 1518 of 20 Nov. 2007, p. 27, the Commission once again pleas for strong cooperation between (national) regulators. Examples in financial services, electronic communications and electricity & gas are provided. This is as far as the Commission can go under Meroni. Of course, there is also the query whether the Commission would be all that keen to see fully-independent European regulators emerge!
for patents, and in financial capital markets there are no formal barriers but different standards and high trade costs in equity. The economists' concept of ’the‘ IM is therefore still far away. Economists have difficulty in coping with the phenomenal differentiation in IM issues, not only with respect to highly differentiated and technical regulation, but also for numerous barriers to market integration. Thus, it may perhaps come as a surprise to political scientists and lawyers that aggregate studies on IM effects are relatively few, but once one realises the magnitude and complexity of the task, the paradox may be appreciated. 42 Aggregated studies on the IM cannot easily be cumulated from the sixties to today, yet, in principle, the economic gains from the IM should be calculated from the beginning. The more recent empirical studies do not report impressive gains, although, in fairness, they do not cover the years before (say) 1990. Nevertheless, until a decade ago, the idea was that the EU's IM had become quite integrated, at least for goods. The 'home bias' literature has presented a new puzzle to economists as it shows that Europeans may not be so integrated after all.
The IM paradox is that it is (too) often regarded as a boring and uninspiring subject in European integration and at the same time, it is used as the EU's workhorse par excellence to pursue an incredible range of objectives. The Treaty design of the EC is even such that the IM (and EMU) are the only significant means, selectively supported by the EU budget, for (in Amsterdam) no less than 8 socio-economic aims. Consultations and the 2007 Commission 'vision' exacerbate this ‘workhorse’ function. An IM driven mainly by the goals to be pursued is likely to be a more fruitful approach than the classical extrapolation of the legal 'completion' route, which is close to being exhausted for political reasons. The economic case for deeper services market integration is only beginning to be built up by economists now; if it comes to the largest segment outside tourism (business services) the contribution to EU economic growth is already disproportionably high and deeper market integration might accentuate that. The link between the IM and innovation is also critical for Europe's growth but current scoreboards fail to indicate how the IM can stimulate (except for a true EU patent). The debate about the 'social dimension' of the IM is most curious from an analytical perspective because the anxiety seems to be very much an EU-15 phenomenon (in contrast to the new Member States) and the construction of the IM itself provides few arguments for arguing an 'a-social' outlook (see Pelkmans, 2007a). Anyway, most of the social framework
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Moreover, the ‘aggregated’ studies are, in fact, based on sweeping generalisations of e.g. regulatory impact, and invariably leave out a number of details or specific manifestations of the IM (see 3.3.1).
is profoundly national. The EU is itself one of the leading ‘globalisers’ and the IM supports such moves forcefully. It is very hard to understand how the IM with a huge market and such diversity could not be a useful preparatory ground for globalisation. The issue which deserves attention is to appreciate the problem of identifiable losers. A balancing act might be necessary when advocating 'standards' (in fact, what is meant is mainly regulations) at world level for reasons of preserving competitiveness: the 'level-playing field' versus 'raising rivals' costs'.
The political legitimacy of deepening and widening the IM is a paramount issue which has to be taken serious by economists (and the EU institutions). Between the three routes to ’more IM’, the incremental strategy is bound to be selective and cumbersome (as indeed it was under the two strategies pushed by Commissioner Bolkestein), but possibly fruitful in the longer run. The November 2007 Commission proposals on a ‘new approach’ to the IM clearly belong to the class of incremental strategies. Feasible, presumably, but working only gradually and with a piecemeal structure of initiatives. The ‘economic union’ approach is heavily dependent on MLG aspects (which cause complexity without effectiveness, yet, remain inevitable in the Union) and some measure of common equity (or, 'solidarity' in Tietmeyer's famous wording when still Bundesbank president), which is unlikely to come about in the foreseeable future. The functional subsidiarity approach is still insufficiently recognised by the current generation of politicians. Setting consensual aims and firmly backed strategies might work for the IM, if and only if the question of political legitimacy (which, in and by itself, is helped by a goal-driven IM, as long as voters can associate with such goals) is convincingly addressed in the MLG framework at both levels of government.
Conditions for business (patent; other IPR; I.
Acc. Stand; Corporate governance/take- over; SE for SMEs
Slimming Regulation (see Better Regulation) Enforcement acquis (more/swifter sanctions; decentralising; consumer prot.; administrative cooperation) Better info (various) (new MS) Procurement (SOLVIT for PROC; national supervisors; e-proc.; defense Reducing tax obstacles (parent/subsidiarity Dir. revision; mergers; corporate tax base harm.; car registr. tax out)
Network Industries (all + state aids:
PPPs) Free movement
services (Fin. Services; Action Plan; Services Dir (!); ext. Of 98/34 Free movement of
goods (MR, standards, eco- design; unsafe goods) business (patent;
other IPR; I. Acc. Stand; Corporate governance/take-
over; SE for SME